AB InBev: a developing taste

The king has returned. After 20 consecutive years of falling volumes, Budweiser finally became a growth story in 2010. The “king of beers”, though, needed its own version of a stimulus programme to arrest its decline, including relentless exposure at the world’s biggest sporting event, the football World Cup. The need to spend to sell is a worry for owners AB InBev. Less beer flowed from the Belgian brewer’s taps in every developed market last year. The company released annual results on Thursday that included earnings per share growth of 28 per cent, and operating margin expansion of 2 percentage points, but it should not be judged on past progress in the bottom line. Since the merger which created the company in 2008, its results have been propped up by cutting the considerable fat in its US operation and selling non-core assets. But with that process almost complete, boosting the top line is now essential. This looks tough. In North America, where one-third of the company’s output is drunk, AB InBev volumes fell by 3 per cent last year – a faster decline than the market. High unemployment is a problem, but not a sufficient excuse; the average jobless rate in the key US demographic, males aged 20-35, rose only slightly last year. Developed markets look ex-growth for AB InBev. Drinkers are shying away. Last year’s price increases helped but were merely a short-term fix, and acquisitions can be ruled out on antitrust grounds. For expansion, the company’s now depends almost totally on emerging markets, particularly Brazil and China, which currently consume about half the company’s production. If sales keep their current trajectory, the company should be considered an emerging market play – with an annuity-style developed markets business bolted on the side